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Will Eagle Mountain see phone-rate drop?

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Eagle Mountain residents may someday see their telephone rates fall, but a legislative committee on Tuesday debated whether a bill that would make that happen is instead simply a government bailout of a developer's bad decision.

After more than an hour of discussion, the House Public Utilities and Technology Standing Committee adjourned without taking action. Some lawmakers said they support the bill, others oppose it and one called for the matter to be tabled.

HB59 would allow Eagle Mountain's municipal phone utility — the only municipal phone company in Utah — to access the state's Universal Service Fund, which is designed to offset costs of providing telecommunication services to rural Utahns. Customers there are among telecom customers throughout the state that pay into the fund.

The bill's sponsor, Rep. David Cox, R-Lehi, said Eagle Mountain's rates are the highest in the state. Eagle Mountain's developer created the utility when it decided not to pay Qwest Communications International Inc. to serve the community.

Eagle Mountain's basic service costs $25 for businesses and $20 for homeowners per month. Most small phone utilities have rates of $10 to $11 for basic service, Cox said.

David Irvine, an attorney representing Eagle Mountain, said that with HB59 the utility would be able to get less than $100,000 each year for four years. That money would be used to keep equipment up to date, which would make the system more attractive for a potential buyer.

The city is looking to sell the phone system, described by people at Tuesday's meeting as "an unfortunate situation," "a very rare duck," "a tar baby" and "a millstone."

But Irvine said a sale could take two years or more to complete. If the customer base shrinks during that time because people opt for wireless or other service alternatives, the system would become less attractive to a buyer and current customers likely would be stuck with it.

"We're looking at this as a very temporary proposition," Levine said of having the municipal system receive USF money. "The tenor of the city council today is to sell the system and do it with all speed."

Levine noted that any private company that takes over the system — which has 1,700 lines serving the community's 4,000 residents — would be eligible for fund money.

Levine said use of USF money would cause customer rates to drop to meet Utah Public Service Commission fund guidelines, which are between $11 and $13 monthly for residential accounts and $20 for business customers.

But not everyone favors the bill.

"This is quite a different matter than the Universal Service Fund was created to address," said Tom Bingham, president of the Utah Manufacturers Association. "There was a decision made here, albeit a bad one, that the Legislature should not step in and rectify."

Committee Vice Chairman Douglas Aagard, R-Kaysville, questioned why the fund access was needed for four years when a sale might be completed in two.

"I'm really struggling here with this change in policy, where the state is being asked to come in and clean up someone else's problem," Aagard said.

"The citizens who have come in here are not the ones who made the decision . . . but they are the ones suffering from it," Cox countered.

"It's been one horrible tar baby since this thing was organized," Levine said. "There's no economic incentive for the city to delay this transaction. . . . It's a real millstone around the necks of these residents."

Rep. Gordon Snow, R-Roosevelt, said people who have moved to Eagle Mountain should have known about the high phone bills. "I think this is a matter of the state bailing out a developer," he said.

Rep. Chad Bennion, R-Murray, while saying it was "a situation of the developer's own making," nonetheless supported the bill. If it fails to pass, he said, the burden of high costs will remain upon residents and not the developer.

Aagard wondered if the bill would serve as a precedent for other developers to follow, but Bennion said strong intent language attached to the bill could indicate it would not be precedent-setting.

The bill has been discussed for months in interim committee meetings, and Rep. Stephen Urquhart, R-St. George, on Tuesday wanted to table the matter. "It's a very complex issue, and we continue to learn more about it each time it's discussed," he said.

But Bennion said tabling it would kill it for a year. "It's very direct. It's very narrow," Bennion said. "There are a lot of straw dogs out there that this would balloon into something it would or would not be."

The fund has a balance between $8 million and $9 million, and its 10 participating organizations receive $5.3 million to $5.5 million per year.

E-mail: bwallace@desnews.com